“Yes, it took us quite a while to pay for World War I. And the big spike in the middle is World War II. So presumably World War III will start any time soon.”

Actually, that big spike is POST world war II public spending which was required to build housing, hospitals, industry and help regenerate the country after the destruction of large parts of the country after the war.

This spending helped create one of the biggest booms in history, with free university education, an NHS that provided free healthcare, welfare benefits from cradle to grave which led to a healthy, well-educated, confident country and a workforce, for the perod, that was relatively well paid.

And all with relatively low inflation as well. In fact, the country has had more instability, recessions and collapses since we dropped the post war consensus.

Borrowing and spending massively in order to invest in real wealth creation is a very good thing, not a bad thing.

I hope you don’t mind me posting this, it’s another excellent blog from Steve Keen with some enlightening charts about where exactly the debt problem is in the UK, and it sure isn’t government debt where the problem lies, even though the coalition would like you to focus on that alone.

It seems to me that people forget that while we were “paying” down world war 2 debt (debt lumped on our grandchildren and all that rhetorical nonsense), we actually saw huge increases in prosperity and wellbeing.

There is no reason why we could not enjoy a similar benefit while “paying” for the banking disaster (ie. by investing rather than slashing and burning).

Umm, not for the first 15 years we didn’t. UK economy didn’t grow a great deal until the 1960s. We retained rationing until 1954. And although there was higher growth in the 1960s and 70s, there was also high inflation especially after the devaluation of sterling in 1967 and the oil price shock of the early 1970s. Remember that inflation has the effect of reducing debt as a proportion of GDP – as growth does too, of course.

So it isn’t quite true to say we “paid off” all that debt. We paid off some of it, yes. We reduced some of it by paying below inflation returns to savers (financial repression). We grew our way out of some of it. And we inflated our way out of some of it.

The poor performance of the UK economy in the late 1940s and 1950s is a matter of historical record. And I looked at the figures for GDP and inflation. Happy to provide them.

The cuts in infrastructure spending were news to me too. I did some research on this and was surprised to find just how much the UK received from the Marshall plan and how little of that went into capital projects. The link I posted is only one of several that all say the same thing – the UK was more concerned with regaining its position as banker to the former Empire than improving its domestic infrastructure. Sounds all too familiar, to me